AWARDS: Private Equity

In May, Colombian private equity fund Tribeca Asset Management, through its Tribeca Energy Fund, sold its 61% stake in the 1.2 gigawatt gas-fired Termocandelaria Power Limited complex for $233 million to a group of Chilean private equity funds. The deal was the largest M&A transaction in Colombia’s power sector from October 2014 to September 2015.

This award recognizes a LatAm private equity fund coming full circle: not just making an astute investment, but turning around the asset and selling it on at a strong margin. Further, the intra-regional nature of the transaction underscores the growing power of Latin America’s own investment pools.

Over the course of its investment, Tribeca improved the facilities from back-up power generators in 2009, into two dual-fuel turbine facilities – Termocandelaria and Termobarranquilla – with a combined output of 1.2 gigawatts.

“The importance of thermal power is on the rise in Colombia,” Luc Gerard, founding partner and chief executive officer at Tribeca, says. “With climate change-related difficulties being felt around the world, Colombia’s government needs to implement preventative measures limiting water use, making thermal power a key infrastructure asset, which mitigates nationwide power outages.”

This exit is Tribeca Asset Management’s most profitable yet. The Tribeca Energy Fund returned 2.2 times the capital it, and its backers, local pension funds BBVA Horizonte and ING Pensiones y Cesantias invested into Termocandelaria back in 2009. The gross annual rate of return from Termocandelaria was 17%.

BBVA Horizonte was bought by Porvenir, a fund owned by Colombian holding company Grupo Aval in 2012. Dutch bank ING’s Latin America-focused pension fund ING Pensiones y Cesantias was acquired and merged into Grupo Suramericana’s AFP Protección in 2011.

Gerard says finding the right buyer was imperative to the deal’s success. Tribeca’s investors were impressed when a group of Chilean private equity funds — SCL Energía Activa, Moneda Asset Management, Mercantil Colpatria and Bancard — bought the thermal power complex.

“By obtaining regional buyers we found companies with a constructive approach to local specificities in an environment where international players would have conducted complex arbitrages,” Gerard adds. “Regional players see Termocandelaria as lower risk and higher return and were willing to value the assets fairly.”

Private equity funds and pension managers are well-placed to help finance the region’s towering infrastructure needs, Gerard says.

“Private equity in Latin America has changed a lot,” he says. “There are more players arriving with a bigger appetite and the market is starting to gain a greater understanding of private equity funds and what we can do.”

The transaction presented its challenges. Tribeca had to consider foreign exchange volatility, a power purchase agreement maturing in 2016, and weak oil prices impacting Colombia’s economic growth.

In a bid to mitigate FX volatility, Tribeca turned to regional funds already invested in the region’s power sector that wanted to diversify their portfolios. SCL Energía, a power-focused fund, is backed by regional pension funds, family offices and development banks. Mercantil Colpatria was keen to diversify its holdings outside of financial services, construction and insurance, and made its first step into Colombia’s power sector through this deal.

Gerard is confident that further successful divestments are ahead for Tribeca. The fund was due to exit another infrastructure-related project in Bogotá in December.

“This year has been one of our best years to date, even among all the negative economic sentiment across the emerging markets,” Gerard says. “Infrastructure remains important to our success as there are a lot of companies and projects that need to service this development, but we expect to be active in healthcare as well.”

BNP Paribas advised Tribeca, while Bancolombia, Banco de Bogotá and Scotiabank provided acquisition financing to the purchasing group. Philippi Prietocarrizosa & Uria was legal counsel to Tribeca. Bogotá-based Gómez-Pinzón Zuleta Abogados and Santiago-based Prieto y Cia and Barros & Errázuriz Abogados were legal counsel to the Chilean buyers. LF

WINNERS: Tribeca Asset Management / Termocandelaria